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Copyright 1981 The New York Times Company
The New York Times
August 6, 1981, Thursday, Late City Final Edition
SECTION: Section A; Page 23, Column 1; Editorial Desk
LENGTH: 693 words
HEADLINE: DIVERGENT GOALS FOR THE DEREGULATORS
BYLINE: By
Eli M.
Noam
BODY:
When a Federal Court of Appeals recently struck down New York and New Jersey
state taxes on oil companies, it dramatized the mounting conflict between two
cherished conservative principles: deregulation and states rights.
The proponents of deregulation usually assume that their actions lessen the
interference of government with business and that they also reduce the powers
of central government. Yet neither of these expectations may be fulfilled
because of the perverse way in which state and local regulation offsets Federal
deregulation.
After Federal withdrawal from regulation, the states, which for several decades
have played only a supporting role in this area, are now confronted with new
responsibilities and demands for action. The problems that Federal rules were
enacted to remedy usually still exist and call for a governmental response, and
organized interest groups advocate state regulations to replace the abolished
Federal laws.
It may seem that there is nothing wrong with a decentralized system in which a
multitude of state regulations bloom, but it must be recognized that this may
lead to more restrictive regulation than ever. Suppose, for example, that
Federal rules on the dumping of nuclear wastes are abolished but that the
states are free to enact their own laws. If New York's restrictions are very
onerous, New Jersey may end up with all of the waste. To protect itself, New
Jersey may therefore tighten its law and make New York the favored dumping
ground. As this process goes on, the overall strictness of state regulation may
become greater than it was under Federal standards.
A second problem is that a multitude of state standards can be an expensive
headache for business. If, for example, each state enacted its own automobile
emission rules, as California did, the
result could make car production extremely inefficient and costly.
Historically, the desire for uniformity has been a major reason for Federal
regulation. For example, the specter of state railroad laws led the railroad
industry to support the creation of a Federal regulatory agency as the lesser
of the evils.
Even where state regulation does not exceed previous Federal standards and
where uniformity is no problem, it may still undercut the intentions behind
Federal deregulation. For example, when the national energy policy is to let
oil and gas prices move freely, state laws that restrict the movements of these
prices undercut this goal.
How is Federal policy then maintained in the face of state regulation? By
having courts declare the state laws inconsistent with Federal law and thus in
violation of the supremacy clause of the Constitution. But notice the increase
in the Federal powers: In the past,
state laws could exist as long as they did not contradict existing Federal
rules. But now courts are, in effect, giving the Federal Government the power,
by its choosing not to regulate, to prevent states and local governments from
exercising their own controls. In the case of energy prices, Federal price
regulation had been in effect for less than two years before it was abandoned;
yet this was apparently sufficient to exclude the states from the field for
good.
Deregulation can thus lead to the emergence of state laws that are more onerous
to business than the previous Federal rules or, alternatively, can result in
the strengthening of Federal powers over state actions. Yet to do the latter
runs counter to the conservative goal of enhancing the role of states. Instead
of the states gaining more powers, they may end up subject to new regulations.
Thus one must often choose between
deregulation and decentralization rather than achieve them both, and advocates
of deregulation must consider this trade-off.
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Eli M. Noam is an associate professor at Columbia University's Graduate School of
Business.